OYO's growth 'incredibly strong', can't give timeline for IPO: Troy Alstead

Profitability 'starting point' ensure growth, says independent director of hospitality major

Hospitality major OYO is focused on profits after its fourth quarter report for Financial Year 2023 (FY23) said it had become cash flow positive for the first time. TROY ALSTEAD, who is visiting India as an independent director on OYO’s board, spoke with Aryaman Gupta and Shivani Shinde in a video interview about OYO’s plan for an initial public offering (IPO) and how it is creating the next rung of leadership. The opportunity for OYO globally is significant, said Alstead, a former chief operating officer of Starbucks. Edited experts from the interview.

Some financial parameters of the company are in black. What will be the ideal time for listing?

I can’t give any specific timeline. At the right time, the board will make the decision around what that timing may look like. We are actively engaged in it all the time. It will partly be based on the progression within the company, which has been incredibly strong.

Also Read: OYO enters premium resorts, hotels category, launches Palette brand

Was the recent tilt towards achieving profitability driven by OYO’s management or is it a directive from the Board?

Both. There is no question that the CXO group has been highly focused on this. It has been in the works for quite a while now. The clear turn around happened in FY23, when the company turned EBITDA positive for the full year for the first time ever, and then turned cash-flow positive in the fourth quarter, but it has been improving over time. It has been a deliberate focus of the management team, with the board highly engaged with those plans as well.

This involved a real reassessment of priorities and a mindset shift towards sustainable growth over time while driving profitability. It’s been a two-year progression towards the numbers that you see now. OYO is better positioned today than ever to drive profitability and growth around the world.

How much emphasis does the Board put on retention of team members, especially executives right below the CXO level?

It (retention) is something very important to us. It’s a passion I have from my previous experiences from places like Starbucks, for instance, where we placed great focus on talent development, talent retention and talent attraction.

Here at OYO, we put a great deal of focus at every board and committee meeting on these discussions. Culture plays a significant role and we are also heavily focused on diversity. At the board level, we see diversity metrics frequently.

OYO is an attractive place for people. The market understands what is happening here as OYO has progressed through an important transformation over the last few years, moved into profitability and developed a good reputation in the market.

The board is also heavily involved in talent. We are always looking at performance of the top group, and even deeper in the company. We spend a great deal of time on succession planning. One of our focus areas is to ensure that great talent is in the right place to accomplish the opportunity of profitable growth that is in front of us.

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Going forward, where does OYO’s focus lie in terms of expansion?

It will be globally focused, with great opportunity for growth and progression within India. Profitability is the starting point of ensuring we have a basis to grow from. We believe there is a global opportunity. However, none of that will change what is a tremendous opportunity in India, for instance. There is much more growth to be had here and we will deliver that in a profitable way. And, at the same time, put appropriate focus on places around the world where the management team believes there is an opportunity to establish a presence and to go after a profitable growth path.

How does the board evaluate the valuation markdowns and how much of this is a concern?

We do (have discussions about valuations). The board looks closely at both the internal environment within OYO for the metrics that are important for valuation, and we are also always looking at the external market to understand what that environment looks like.

How has your expertise in building consumer-facing brands aided OYO’s growth?

I joined OYO three years ago, right after its long growth path, which was too much growth too quickly. That is not unusual, actually. We went through that at Starbucks as well, where we reached a point where we were pushing too much growth and needed to reset a bit, similar to what has happened at OYO.

The progress since then, at OYO specifically, has been fantastic. And it started with deepening the foundation of what OYO needs to be about. It required some restructuring of the organization and how the company operates, downsizing in some respects, and a change in mindset and culture to become focused on profitability and efficiency in the company. It’s not a situation of growth at all costs. Much of what we did and worked hard to do for a lot of years at Starbucks was develop a consistent and steady growth plan to go after what is a very large growth opportunity, and to do it with a foundation of profitability.

And the result at OYO, after a fairly short period of time post-covid, is that the team has moved the company to EBITDA positive after a long period of losses. It took pausing growth and re-establishing the foundation to accomplish that, while simultaneously positioning for growth ahead. In my experience, I have never seen, at such an early stage, the pace at which OYO has navigated itself.

What is your take on OYO’s near and long-term growth prospects?

We have seen a significant improvement in demand coming out of Covid. And I expect that to continue. If I step above that, looking around the world, there is a tremendous opportunity for growth, given the capabilities that OYO brings. And much of what we have been focused on is identifying those priority markets and how do we sequence them in the right ways to ensure that, as we are growing in our largest primary markets, we also develop our growth plans in smaller markets.

The opportunity for OYO globally is quite significant. Our goal, and what I am confident in, is that we have a foundation in place now to go after that growth at the right pace, with the right prioritization and governance processes.
 

How does OYO view corporate governance and how involved is the Board in this regard?

It’s a huge priority. The Board is deeply engaged in it. We are highly active in partnering with the CXO group to establish governance over the last few years, and to put formal board structures in place. There are very formalised agendas and structures that we go through routinely and with great discipline. So, governance is a critical topic. It has been embraced by the team here. The board is, on an ongoing basis, active in it. And we will keep maturing it.